Last month the Industry and Trade Ministry said it sought to raise power retail prices, which it said were the lowest in Southeast Asia, by between 8-10 per cent.

The average retail price will be raised to 948.5 dong (S$0.09) per kilowatt hour from March 1, Prime Minister Nguyen Tan Dung said in the directive seen by Reuters on Sunday.

The price hike for the manufacturing sector will be below the 8.92 per cent average, while households will pay more, Mr Dung said.

The government directive did not say how power price hike would affect Vietnam's inflation, which stood at an annual rate of 17.48 per cent in January, the lowest since last February.

From 2010 Vietnam will allow power companies to retail electricity to customers in the manufacturing and service sectors at negotiable prices under a ceiling, while the retail price for households will still be set by the government, the directive said.

The Industry and Trade Ministry will coordinate with the Finance Ministry to adjust the electricity price on annual basis within a 5-per cent band while any changes beyond the band should be approved by the government, Mr Dung said.

For the first time after years of chronic power shortages, Vietnam has more electricity than it needs as demand has slowed, the government said last month. Electricity demand is forecast to grow 6-7 per cent this year, slowing from the 16 per cent annual rise in 2008, while generation capacity would rise 14-15 per cent as the global economic downturn hit Vietnam's export manufacturers, the main consumers of power.

Reuters - February 15, 2009